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The Dangote Refinery would garner an enterprise value of up to $42.6 billion, according to MoneyCentral’s analysis of comparable global refiners, helping to push up Aliko Dangote’s net worth to $49 billion and 27th position, on the Bloomberg Billionaires Index.
Dangote, Africa’s richest man will jump more than 100 spots to become one of the top-30 richest people in the world, just behind Alain & Gerard Wertheimer of France, who are worth $52.9 billion each, as he closes in on a dual listing on the London and Lagos bourses for his 650,000 barrels per day refinery, by the end of the year.
Being among the top-30 richest persons in the world would be uncharted territory for any African or Nigerian and speaks to the unique ability of the refinery to cater to demand for fossil fuels that’s expected to grow on the continent in the coming decades, even as most of the rest of the world moves in the opposite direction.
Valuation analysis for Dangote Refinery
The refinery, Africa’s largest and newest was built on a peninsula on the outskirts of the commercial capital Lagos at a cost of $20 billion by the continent’s richest man Aliko Dangote and was completed in 7 years.
It can refine up to 650,000 barrels per day (bpd) and will be the largest in Africa and Europe when it reaches full capacity by 2025.
MoneyCentral’s performed two different analyses to try to ascertain a valuation for the refinery.
Capitalization method: For a new refinery or similar asset, the easiest and often used approach is to capitalize the total cost by a cost of equity over the period of incubation.
The Dangote Refinery cost $20 billion and it took an average of 7-years to build. Because not all the funds were expensed once, we modeled the cost of equity (dollar cost) at 12%, which is a premium over the cost of debt to Dangote and which compensates him for the risk he took and the fact that he may have pledged assets for some of the debt.
Using this approach, we arrived at a valuation of $44.2bn. When adjusted for net debt, (debt minus cash) which we estimate at about $2bn, we arrive at $42.2 billion valuation.
Enterprise value per litre method: We backtested or did a validity test on the results gotten from the capitalisation method, by looking at the multiple of refineries abroad using enterprise value per litre (to reflect difference in refining capacity).
Enterprise value is a measure of a company’s total value, often used as a comprehensive alternative to equity market capitalization that includes debt.
MoneyCentral gave Dangote Refinery a premium for likely higher margins because of the fact that the plant is new. It is a pseudo monopoly for now pending when the government owned refineries start operations as well as its access to cheap crude (from within and imports) and large demand in Nigeria and across Africa. It also has zero legacy environment issues that often weigh on the valuation of refiners in other parts of the world.
Our analysis shows Dangote Refinery garnering an enterprise value of $42.6 billion.
There’s a 2.5* premium applied compared to the average Enterprise Value per litre of other global refineries looked at including Valero, Pillips66 and Indian Oil Corp. (see chart).
Most other global refiners are seeing thinning margins plus overcapacity especially in Europe, while the same situation is starting to play out in America as Electric Vehicle adoption increases.
NNPC stake
In 2021, Nigeria’s national oil company (NNPC) took a 20% stake in the refinery project for $2.7 billion. For the government, it means a seat at the Board of the refinery and a steady flow of foreign exchange in the form of dividends, especially with the construction done, ongoing ramp-up and listing so near.
Aliko Dangote’s net worth today is $15.1 billion and 136th position, on the Bloomberg Billionaires Index. An addition of the 80% stake he owns in the Dangote Refinery equivalent to $34 billion would shoot his net worth up to $49 billion.
Valuation necessary as refinery ramps up, begins exports
The valuation analysis done by MoneyCentral is necessary as all current estimates of Dangote’s wealth exclude the refinery, even as it has begun production.
Dangote Refinery has started exporting naphtha to North Asian markets at a time when the clean tanker market is witnessing prolonged firmness.
Naphtha is a lightweight petrochemical feedstock that is separated from crude oil in the fractional distillation process along with kerosene and jet fuel.
The naphtha flow from Dangote is adding to the ton-mile demand in the clean tanker sector and this could be boosting the clean tanker market in the short- to medium term.
Oil trading firms Trafigura and Vitol are said to be marketing the products to end-users and is expected to lead to more competitive pricing.
The main off-takers of Dangote Naphtha are SKN Energy in South Korea with 3 cargoes of heavy grade Naphtha said to have already shipped.
For feedstock, the refinery is seeking to buy millions of barrels of US crude over the next year as it ramps up processing rates.
The plant issued a so-called term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland crude for 12 months starting in July.
The call for US oil highlights how influential the plant will be in global crude and fuel trading.
Dangote Petroleum Refinery has also been supplying both diesel and aviation fuel to the domestic market since early 2024.
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